The Challenges and Opportunities of Distributed Ledgers

Collaboration, consensus and the role that existing, regulated and trusted central authorities should play in introducing the standards, governance and technology to support distributed ledger implementations were among the hot topics of discussion at DTCC’s 2016 Blockchain Symposium.

Nearly 500 experts and senior-level executives from large and small banks, fin-tech companies, service providers, regulators and academics attended the full-day conference, entitled “Blockchain: Tapping the Real Potential...Cutting Through the Hype,” in New York on March 29.

Michael Bodson, DTCC President and CEO, opened the event with a video featuring industry leaders discussing the hype around blockchain technology. “As you can see from the video there are competing opinions, ranging from the skeptics and cynics, to the evangelists and disciples and everyone in between,” Bodson told the audience. “Our goal today is to, as the name implies, cut through the hype and identify the real potential of blockchain.”

DTCC has taken an industry leadership role in advancing the use of distributing technology and has called for a collaborative approach to ensure future solutions deliver on the promise of modernizing the post-trade process.

The Symposium featured a diverse group of experts in blockchain and distributed ledger technology as well as senior-level industry leaders to gain their insights on a wide range of topics, including:

What the technology is and why it matters to the financial industry;

Determining a best practice approach in developing the necessary standards and protocols; and

Understanding how the technology can bring real value to financial organizations.

The event also took a deep-dive into the blockchain landscape: its potential to innovate, as well as the regulatory view on a technology that could dramatically reengineer the post-trade process. In short, the focus was on what these potential innovations could mean for the future of the financial industry.

Panel topics included:

What’s Real & What’s Hype? Panelists defined “blockchain technologies” and gave their views on the greatest challenges to implementation.

From Today to Tomorrow: Building a Roadmap for Blockchain. With interest in blockchain among capital markets participants now at a fever pitch, panelists discussed use cases that the industry should prioritize.

The Right Model for the Securities Industry? Panelists gave a range of perspectives on the different models of blockchain, use-case scenarios and how the technology implementation will evolve over time.

How is Blockchain Different from the Internet and other Disruptive Technologies? Parallels between blockchain and other disruptive technologies, as well as the investment opportunities it offers served as the focal point of discussion.

In Conversation: Bitcoin and the Digital Currency Revolution. The group discussed the successes and challenges in the adoption of bitcoin, and what it takes to “get it right” to implement blockchain technology.

Through a Broader Lens: Implications for Regulators and Risk Professionals. Panelists provided their perspectives on the regulatory and risk challenges of blockchain technology.

“The turnout at this event reinforces the high level of interest this topic has generated in a relatively short period of time,” Bodson said. “We look forward to continuing the conversation to help identify opportunities to improve upon the existing infrastructure in certain areas where automation is limited or non-existent and where the technology provides a clear benefit over existing processes.”

Jerry Cuomo, Vice President, Blockchain Technologies, IBM, delivered the lunch presentation, “Putting Blockchain Into Practice: New Ideas on How We Exchange Value.” Cuomo said distributed ledger technology can “help us reimagine the world’s most fundamental business properties.” His presentation focused on three topics: open, develop and adopt. Cuomo explained blockchain must be open and also must be made ready for business; made easy for developers to build blockchain-based applications, smart contracts; adopting blockchain incrementally.

What Are Regulators Thinking?

J. Christopher Giancarlo, Commissioner, U.S. Commodity Futures Trading Commission (CFTC), addressed blockchain and regulation in a special address, urging supervisors globally to take a “do no harm approach.” He asserted “innovators and investors should not have to seek government’s permission, only its forbearance, to develop distributed ledger technology so they can do the work necessary to address the increased operational complexity and capital consumption of modern financial market regulation.”

Bridge to the Future

Bodson and Blythe Masters, CEO, Digital Asset Holdings, closed the symposium with a candid, one-on-one discussion about the need for industry collaboration and DTCC’s role in aligning the technology with the core principles of enhancing efficiencies and reducing risks and cost.

Speaking on the topic of industry collaboration, Masters noted that it’s difficult to get industry participants to agree on standards until they actually start trying to use the technology. Calling it a “little bit of a chicken and an egg issue,” Masters said a lack of standardization is a major obstacle to adoption.

She pointed out, however, that it’s not unheard of for financial entities to be able to cooperate and collaborate. She noted that the creation of DTCC itself is an example of an industry getting together to solve an infrastructure problem.
Masters referred to DTCC’s role as being related to building bridges and tunnels into and out of the new digital world, and those bridges and tunnels have to link to the world of the status quo. Without those bridges, she noted, the industry will end up with exactly the same fragmented markets, even more complexity, and increased liquidity relative to the alternative. “And who more important and who better situated than an incumbent, centralized service provider of that nature?” she stated.